I met Treasurer Jim Chalmers on the beach here a little while back. I asked him, ‘Are we in a housing crisis or a cost-of-living crisis?’
He wasn’t much interested in discussing economics while watching his kids frolic in the waves. I was serious though, because I suspect the two crises are related – related way back, in fact, to many of the policies and actions of our governments, not least the Labor party.
Economic rationalism – deregulation, privatisation and free trade agreements – became the mantra of Hawke and Keating from the early 1980s and was continued by Howard.
As our manufacturing sector struggled to compete in an increasingly liberalised global market, businesses and public assets were sold off, factories packed into boxes and shipped overseas.
Then where does the surplus cash go? The smart money moved into real estate.
Governments made the move more attractive by winding back public housing provision in favour of private sector development, while Commonwealth Rent Assistance subsidised the private rental market.
Howard went a step further with his 50 per cent capital gains tax discount for real estate investors.
Surplus funds will be invested and, as the diversity of opportunities to invest decreases, competition for the main game increases.
Australia’s economy has become less diversified and more concentrated, focusing and incentivising money into the real estate market. Ironically, this market is now failing to deliver.
As housing prices inflated, driven also by the related finance, marketing and insurance sectors, builders and building material suppliers naturally capitalised, further pushing prices through higher labour and material costs. The housing boom revealed extraordinary surplus capital, which soon found its way into broader price rises as markets adjusted and capitalised.
Landlords, not to be outdone, lifted rents to levels few would have imagined a generation ago.
The housing crisis sits at the heart of the cost-of-living crisis, which itself sits at the foot of decades of economic liberalisation funnelling ever-greater amounts of wealth into a concentrated sector with nowhere else to go.
The market has done what markets do: it has extracted the maximum return available – free-market ideology has produced a housing system increasingly incapable of housing people at prices they can afford.
Jim has to have that conversation.
For four decades The Echo has printed the stories some people loved, some people hated, and some pretended not to read. If you want us to keep telling the truth, the real truth, not the sugar-coated version. We’ll need your support to keep the presses rolling. 
